Friday, November 13, 2015

WSJ Returns Fire: Slams Donald Trump (And correctly so)

Being attacked by Donald Trump is one of journalism’s more exhilarating experiences. We got the treatment on Thursday when he took to various TV shows and Twitter with his usual soft sell and demanded corrections, apologies and resignations after our editorial reference to his trade policy. We haven’t had this much fun since Eliot Spitzer left office.

Mr. Trump isn’t upset that we called him potentially the Republican Party’s “most protectionist nominee since Hoover.” Perhaps he took that as a compliment. He’s mad because he says we said that he didn’t know that China isn’t part of the Trans-Pacific Partnership (TPP).

But we didn’t say that. We wrote that judging from his debate remarks Tuesday “it wasn’t obvious that he has any idea what’s in” TPP. It still isn’t. Here’s the debate transcript after Mr. Trump was asked by moderator Gerard Baker about the candidate’s opposition to TPP and why he would “reverse more than 50 years of U.S. trade policy”?

Mr. Trump: “The TPP is a horrible deal. It is a deal that is going to lead to nothing but trouble. It’s a deal that was designed for China to come in, as they always do, through the back door and totally take advantage of everyone. It’s 5,600 pages long, so complex that nobody’s read it. It’s like ObamaCare; nobody ever read it. They passed it; nobody read it. And look at the mess we have right now. And it will be repealed.

“But this is one of the worst trade deals. And I would, yes, rather not have it. With all of these countries, and all of the bad ones getting advantage and taking advantage of what the good ones would normally get, I’d rather make individual deals with individual countries. We will do much better.

“We lose a fortune on trade. The United States loses with everybody. We’re losing now over $500 billion in terms of imbalance with China, $75 billion a year imbalance with Japan. By the way, Mexico, $50 billion a year imbalance. So I must say, Gerard, I just think it’s a terrible deal. I love trade. I’m a free trader, 100%. But we need smart people making the deals, and we don’t have smart people making the deals.”

Mr. Baker then noted that the deal’s 5,000 pages had only been published last week: “Are there particular parts of the deal that you think were badly negotiated?”

Mr. Trump: “Yes. Well, the currency manipulation they don’t discuss in the agreement, which is a disaster. If you look at the way China and India and almost everybody takes advantage of the United States—China in particular, because they’re so good. It’s the number-one abuser of this country. And if you look at the way they take advantage, it’s through currency manipulation. It’s not even discussed in the almost 6,000-page agreement. It’s not even discussed.”

So when he is asked about TPP, Mr. Trump’s first reference is to China, which isn’t in TPP, and he now says the world should have known that he knows China isn’t part of it because amid his word salad he said that the deal “was designed for China to come in, as they always do, through the back door.” Mr. Trump’s meaning wasn’t clear to Rand Paul, who interjected for the audience’s clarification that China isn’t part of the deal, as we reported.

Our editorial point was what everyone who understands East Asian security knows, which is that China would be delighted to see TPP fail. China is putting together its own Asian trade bloc, and those rules will be written to its advantage. TPP sets a standard for trade under freer Western rules. China could seek to join TPP in the future, but it would have to do so on TPP’s terms, not vice versa.

TPP would help China’s competitors by giving them greater access on better terms to the U.S. market. Production is likely to shift from China to Vietnam and other countries. In October the Financial Times quoted Sheng Laiyun, the spokesman for China’s National Bureau of Statistics, as saying that, “If the TPP agreement is finally implemented, zero tariffs will be imposed on close to 20,000 kinds of products. . . . That will create some pressure on our foreign trade.” Some back door.

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As for currency manipulation, we gave Mr. Trump a forum for his views in our pages on Tuesday. He doesn’t understand currencies any better than he does TPP. Currency values are largely determined by central banks and capital flows. If China made the yuan convertible and let it float, the initial result would probably be a falling yuan as capital left the country. A trade deal with a binding currency provision could also subject the U.S. Federal Reserve to sanctions as a “manipulator” every time it eased money in a recession.

All of this bears on Mr. Trump’s candidacy because he is running as a shrewd deal-maker who can get the economy moving again. Starting a global currency and trade war “on day one” would get America moving toward recession—or worse